Lululemon’s FY21 Outlook Surpasses Estimates After 4Q Beat

Lululemon Athletica reported better-than-expected 4Q results. Moreover, the athletic apparel and accessories retailer’s fiscal 2021 outlook also surpassed Street estimates.

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Lululemon’s (LULU) adjusted EPS increased about 13% to $2.58 and came in well ahead of the Street estimates of $2.49. Gross margins increased 60 basis points to 58.6%. However, the adjusted operating margin decreased by 290 basis points to 26.9%.

Revenues increased 24% year-over-year to $1.7 billion and topped consensus estimates of $1.66 billion. Total comparable sales increased 21% year-over-year. The company opened six new company-operated stores and ended the quarter with 521 stores.

CFO Meghan Frank said, “We pulled forward investments in our direct-to-consumer channel, completed our first acquisition, and tightly managed expenses while also supporting our people. These measures contributed to our strong fourth quarter results, including growing revenue by 24%, and are helping fuel our even stronger top-line growth projections for 2021.” (See Lululemon stock analysis on TipRanks)

As for 1Q, Lululemon Athletica sees earnings in the range of $0.81-$0.85 per share, compared with consensus estimates of $0.82. The company forecasts 1Q revenues in the range of $1.1-1.13 billion, versus consensus estimates of $999.5 million.

For fiscal 2021, the company anticipates EPS in the range of $6.30-$6.45, significantly higher than consensus estimates of $4.58 per share. Lululemon Athletica foresees FY21 revenue in the range of $5.55-5.65 billion, versus Street estimates of $4.33 billion.

Following the results, Oppenheimer analyst Brian Nagel maintained a Buy rating and a price target of $405 (27.7% upside potential) on the stock. In a note to investors, the analyst said, “In our view, a still small global footprint, superior product innovation, and an overall shift to athleisure should support continued outsized top- and bottom-line expansion at LULU for the foreseeable future.”

Overall, consensus among analysts is a Strong Buy based on 10 Buys and 2 Holds. The average analyst price target of $421.08 implies upside potential of about 32.8% to current levels. Shares have gained about 68% in one year.

Furthermore, TipRanks data shows that financial blogger opinions are 84% Bullish, compared to a sector average of 69%.